As the foreign exchange industry enters a period of consolidation, Lulu Exchange announced on Tuesday it had acquired Al Falah Exchange Company.

In a move that will make Lulu Exchange the second-biggest foreign exchange and remittance player in the GCC, the Abu Dhabi-based company will acquire 100 per cent ownership of Al Falah, boosting its branch count by 30 to reach 73 in the UAE and 170 globally.

“The acquisition is significant as the industry is getting into a phase of consolidation and we are excited to engineer this first of its kind merger,” said Adeeb Ahamed, the managing director of Lulu Exchange. “Through this acquisition, Lulu Exchange will become the third-largest foreign exchange and remittance company in the UAE in terms of network."

Al Falah’s 30 branches will be rebranded as Lulu Exchange Mr Ahamed said, adding that the company expects its volume of business to increase by 50 per cent, “while at the same time there will be significant cost savings”.

Promoth Manghat, the chief executive of UAE Exchange - the biggest foreign exchange network in the Emirates and the GCC - said he expected more consolidation in the industry to follow. This, he said, follows new Central Bank regulations on capital requirements for currency exchange houses introduced in the UAE in 2014 and a growing pressure on the sector to keep up with technological innovation.

“Following the regulations, many of the players may find it difficult in terms of the investment needed from a compliance point of view. These things need scale and investment so we expect more consolidation in the marketplace.”

However, Mr Manghat said the recent acquisition did not pose a threat to UAE Exchange.

“We have a solid customer base that has been built over the years and our network, from a touch-point perspective, is quite comprehensive. We are continuing to increase the touch-points both through the expansion of stores and virtually so we don’t expect an impact on our business from the acquisition,” he said.

Lulu Exchange, part of the Lulu Group, offers financial services such as remittances, currency exchange and wage and salary administration. It first launched eight years ago and currently operates in Oman, Kuwait, Qatar, Bahrain, India, Bangladesh, Philippines and Seychelles as well as the UAE.

Mr Ahamed said its short-term goals in the next three years will be to expand its footprint across South East Asia and then Europe, as well as tapping newer markets regionally and globally.

The company also plans to expand its digital presence as emerging technologies continue to drive change in the financial services industry. The company said it has a digital app in development that will offer the same level of service as its physical branches.

“Effectively, we aim to move 30 per cent of our transactions on to the digital platform by 2020,” said Mr Ahamed. “With better convenience and ease of selection, digital business is the way forward and we plan to expand into South East Asia market riding on this digital wave.”